All About Nortel - Latest Comments in Bigger Q4 Loss; Smaller Nortel

Re: Bigger Q4 Loss; Smaller Nortel

Nortelhand — Fri, 29 Feb 2008 00:50:23 -0000

the blood has been flowing from Nortel for a long time now. How much more bleeding can it do? Just look at the chart, and they still have not offically said there is a recession yet. Sometimes long hard winters kill sick old animals/companies.

Re: Bigger Q4 Loss; Smaller Nortel

Observer — Thu, 28 Feb 2008 19:05:32 -0000

Nortelhand - Wall street is full of tricksters, fraud, speculators and traders who want nothing more than to make money at the expense of shareholders. They care little about accounting or finance and thrive on volatility. They are walking the market down as the recession hits in the United States. Once we see a full bear market and there is blood in the streets the buying will start once more and Nortel will be perceived as a good value play. The game goes on.

Re: Bigger Q4 Loss; Smaller Nortel

Another Nortel Watcher — Thu, 28 Feb 2008 15:37:00 -0000

AFTER taking into account the tax write-off, EPS is still below market expectations. THAT is what caused the stock value to drop. I'm sure MZs "It's not my fault" finger pointing didn't help any.

Re: Bigger Q4 Loss; Smaller Nortel

$8467 — Thu, 28 Feb 2008 13:58:48 -0000

if you deduct something from the asset side of the balance sheet you need to deduct the same amount either from equity side or from the liability side just to offset it.

if you look at the 2007-end figures, the ownership equity came in as US$2,7 bn vs the third quarter 2007 figure of US$2,9 bn.

now, you can see that this loss did not affect to the company's shareholders equity, but the it reduced liability side. if it was a real loss, the shareholder equity must have been depressed around US$1 bn.

Nortel has a shareholder equity of around US$3 bn and market cap of US$4 bn.

it means that investors are paying only US$1 bn for the company's future income stream.

does it worth it or not, you decide it?

if you think that Nortel is going to make money in the future hold on to the stock,

if you think that the company will loose more money (reminding that the company made profit out of its operations in 2007) and its equity will melt down, than sell the stock.

regards,

Re: Bigger Q4 Loss; Smaller Nortel

Not An Accountant — Thu, 28 Feb 2008 13:11:42 -0000

I have a question and it might sound really stupid. But since I'm not an Accountant I think I can ask it to the commentators of this blog.
OK, NT have "written off" $1bn of deferred tax assets because of governance rules, etc. It's not cash out, we all got this part. But the fact that they had to be written off now, does it automatically imply that these tax credits were "incorporated" in past company balances?

Re: Bigger Q4 Loss; Smaller Nortel

$8467 — Thu, 28 Feb 2008 12:29:40 -0000

the price should come down to reflect US$1 bn asset write off. actually, it happened so. you can think of this deferred asset as a bonus (not paying tax in the future). it had been in the share price and since it is written off, the share price must be adjusted accordingly. hence this is a corporate governance or analyst awareness issue, not an operational issue. in other words, this loss is irrelevant of Nortel's operations. Nortel actually made a profit out of its operations in 2007.

would you guys say the same thing if there were no write-off but a 30 cent earnings per share?

Re: Bigger Q4 Loss; Smaller Nortel

Nortelhand — Thu, 28 Feb 2008 11:25:42 -0000

I am not an accountant, but wall street is full of them and it seems they are voicing there feeling loud and clear by dumping Nortel. So I guess that a tax loss is just as bad as a sale loss, otherwise wall street would not be dumping? Call me a stupid engineer, but a big negative number is a big negative number and it seems that the accountants on wall street agree with me.

Re: Bigger Q4 Loss; Smaller Nortel

Mr D — Thu, 28 Feb 2008 09:17:39 -0000

Nortelhand, it seems you don't hold out much hope for the future. I agree with your comment about the crew, but if it wasn't for the tax adjustment, Nortel would have made a profit in 2007 - a fact that appears to be missed by a lot of the general commentary.

Also, are you aware of the quote from an analyst at Charter Equity Research: “Growth is very slow for everybody, including Nortel, and it's not going to get any better any time soon"?

As for a takeover, in the unlikely event this happened, I don't think the approach would be 'using what is good and liquidating what is bad'. The approach would probably be to relocate (i.e. sack) *all* the employees, adopt a very small portion of the plethora of products in the Nortel portfolio, and consign the rest to history. I don't believe this would be in the best interest of the industry, let alone the company.

Re: Bigger Q4 Loss; Smaller Nortel

Nortel watcher — Thu, 28 Feb 2008 08:30:57 -0000

ex-nt,

What about adding to your list:

- adjusting Nortel staff salaries downward to within industry average

It is common knowledge that Nortel pays employees above the industry average still today.

Re: Bigger Q4 Loss; Smaller Nortel

ex-nt — Thu, 28 Feb 2008 08:26:08 -0000

Sam, right on. This is capitulation. Nortel hires superstar Mike Z and pays him and his buddies superstar salaries, and now, two years later, they blame the prior management.

Here are a few things where Mike Z should take responsibilitiy:

- not selling UMTS business sooner. Alcatel offered to buy it before, but he hung onto it and then got more losses and less cash.
- bringing in a bunch of expensive sycophants as senior execs
- not shutting down or selling off unprofitable businesses
- concentrating on operations and 6 sigma instead of strategy
- not merging with more powerful competitors when there were opportunities

Re: Bigger Q4 Loss; Smaller Nortel

$8467 — Thu, 28 Feb 2008 07:50:41 -0000

to make it more clear my previous message,

Dear commentator 'Watcher',

i think Mark Sue must answer this question (deferred tax asset issue). Or, may be the blog owner raise this issue in the front page and we somehow get the answer from the people responsible

Re: Bigger Q4 Loss; Smaller Nortel

$8467 — Thu, 28 Feb 2008 07:41:18 -0000

i think Mark Sue must answer this question. Or, may be the blog owner raise this issue in the front page and we somehow get the answer from the people responsible.

Re: Bigger Q4 Loss; Smaller Nortel

Watcher — Thu, 28 Feb 2008 06:56:44 -0000

I just want to know from where the deferred tax balance came from and why there was not any information provided on it before. It raises some questions about the integrity and effectiveness of financial controls after all recent turmoil.....

Re: Bigger Q4 Loss; Smaller Nortel

Nortelhand — Thu, 28 Feb 2008 06:39:39 -0000

At this point the best thing for employees and investors is for Nortel to sell its self off or be acquired (friendly) by a major that can use what is good and liquidate what is bad. It would be nice if Mike Z could get the acquiring company to make good on the Nortel employees retirements. It is hard to blame the crew if the captain has the pilot chart a course into the rocks, the crew still does its job.

How is that for construtive direction Mr. D?
Great job Mike Z!

Re: Bigger Q4 Loss; Smaller Nortel

Mr D — Thu, 28 Feb 2008 05:52:55 -0000

I see a lot of doom-mongering and negative comments, but nothing particularly constructive except that from 'inalmm'.

Can any of the critics here suggest anything in the way of a realistic strategy?

Re: Bigger Q4 Loss; Smaller Nortel

Building New Realities — Thu, 28 Feb 2008 04:56:56 -0000

Did anyone bother to read the Yahoo article linked by poster "Blame Game"? Here's the link again. http://biz.yahoo.com/ap/080...

It was not Mike Z. that said those things - those were the words of RBC's Mark Sue. In fairness, Blame Game may not be intentionally misleading us. There is a correction posted at the bottom of the article which says: (This version CORRECTS attribution in fifth graf. Should be Sue instead of Zafirovski.)

Re: Bigger Q4 Loss; Smaller Nortel

how about this? — Thu, 28 Feb 2008 03:21:55 -0000

http://www.thestar.com/arti...

Re: Bigger Q4 Loss; Smaller Nortel

Casual Observer — Wed, 27 Feb 2008 23:43:00 -0000

the quote by Z tells you the blame game has started. I'm sure this will be great for morale. I wonder what other surprises are in store after this quarter. Remember there are still about 10,000 material weaknesses in Nortel's balance sheet. At this point I think the only thing you can trust is the cash that is held by the bankers. At this point you have to feel bad for the employees who've roughed it out thru three administrations which have all failed.

Re: Bigger Q4 Loss; Smaller Nortel

Johnny Aerotek — Wed, 27 Feb 2008 17:11:39 -0000

MONTREAL — Mike Zafirovski, president of Nortel Networks Corp., says “the stars are aligning” for the technology giant and he's counting on the growth of Internet video to provide opportunities for his firm.

“I do believe as 2006 winds down, this will show a nice improvement over 2005,” Zafirovski said Monday during a speech to the Canadian Club in Montreal.

Zafirovski admitted Nortel was “in the form of a perfect storm during the last four or five years, and we do see a place where the stars are aligning for Nortel to come back very strong”.

The Nortel CEO said he was counting on a number of the technological trends like “hyperconnectivity” to help play to the strengths of the company.

October 24, 2006 at 8:00 AM EST

Re: Bigger Q4 Loss; Smaller Nortel

Another Nortel Watcher — Wed, 27 Feb 2008 16:28:25 -0000

Stock Price when MZ took over - approx. $35. Current stock price - approx. $9.80. Getting close to 75% erosion. A long way from a 3-5 year turnaround plan with a stock price target of $60.

So, if the 'weak balance sheet' is the problem, why no mention of it the last 2 years? It's waaay too late to blame this mess on the previous management team. Whatever happens now sticks to MZ. The previous manaement team didn't load up a cabinet with arrogant GE-disciples who don't know squat about the telecom industry. MZ did that all by himself.

Re: Bigger Q4 Loss; Smaller Nortel

$8467 — Wed, 27 Feb 2008 15:48:31 -0000

in addition to my previous comments, i underline that the loss is because of writing down of a deferred tax assets. this means this is a non cash item. i don't understand why analysts except for Bloomberg one don't mention this fact.

Re: Bigger Q4 Loss; Smaller Nortel

serg — Wed, 27 Feb 2008 15:45:41 -0000

Nortel Stockholder 2008 MUST-DO list

1. get rid of Zaf

Re: Bigger Q4 Loss; Smaller Nortel

BoGowan — Wed, 27 Feb 2008 15:42:02 -0000

Keep in mind that one of the commnts in Nortel's announcement was that "in 2007 approximately 30% of the employees in affected positions were redeployed or transferred to other roles in the Company." Z commented on the morning call that they would make efforts to do the same here.

And I thinkg your assumption that "code is frozen" is flawed, assuming that entire teams will be let go overnight and then picked up by a completely new team. Z commented that this restructuring would happen across 2008 and 2009.

Re: Bigger Q4 Loss; Smaller Nortel

$8467 — Wed, 27 Feb 2008 15:25:45 -0000

finally a reasonable comment came from a Bloomberg analyst, please read it and stop being panic. numbers talk. if the one off deferred tax charge is excluded. Nortel would close the year with a profit of 30 cents vs. forecast of 44 cents.

http://www.bloomberg.com/ap...

" Nortel, based in Toronto, wrote down the value of its Canadian deferred tax assets, benefits used to lower future taxes, partly to reflect the drop in Canada's corporate tax rate in 2007 and the rise in value last year of the Canadian dollar, according to a fact sheet sent by spokesman Mohammed Nakhooda.

Profit, excluding the $1.04 billion tax adjustment and other items, was 30 cents a share, missing the average estimate of 44 cents on sales of $3.28 billion in a Bloomberg survey of analysts. "

Re: Bigger Q4 Loss; Smaller Nortel

Timur — Wed, 27 Feb 2008 14:37:05 -0000

The other option Zman has is to split the company up. The mistake that Mike made in the beginning was thinking he could "operate" his way out of the problems that Nortel has. He should have realized that with a poor balance sheet he should have taken a much more agressive approach to break the company up.